The Austrian School of economics

[Blart]

This fringe economic theory has been gaining in popularity online, particularly among those who aren't usually interested in economics.

Unlike econ that's taught in universities, this is much easier to understand. There's no mathematical modeling, and no empirical testing (they proudly refute both) - it's just words.

It's very appealing, no calculus to learn, just read "The Road to Serfdom" or watch a "Peter Schiff was right1!!!" youtube video and you're ready to argue with your buddy who spent years getting his PHD!


Normal Science
Hypothesis does a cause b
Check data, check theory, built upon other proven things
a is correlated with b
Control for direction of causation, other variables
omg a causes b !

Austrian School
Hypothesis: A causes B
elaborate convincing argument that says A causes B, no testing of any hypotheses as our problem is "too complex" to test for, but don't worry guys we are right as our logic is sound.
So because we "proved it" A causes B


I'm not being critical - this is what they actually believe:

"Its statements and propositions are not derived from experience... They are not subject to verification or falsification on the ground of experience and facts." - Ludwig Von Mises
"[theories in the social sciences] can never be verified or falsified by reference to facts." - F.A. Hayek


Freed from pesky things like "facts" and "evidence" - this economic religion is perfect for arguing online.

[BroncoBeavis]

Originally Posted by Blart

This fringe economic theory has been gaining in popularity online, particularly among those who aren't usually interested in economics.

Unlike econ that's taught in universities, this is much easier to understand. There's no mathematical modeling, and no empirical testing (they proudly refute both) - it's just words.

It's very appealing, no calculus to learn, just read "The Road to Serfdom" or watch a "Peter Schiff was right1!!!" youtube video and you're ready to argue with your buddy who spent years getting his PHD!


Normal Science
Hypothesis does a cause b
Check data, check theory, built upon other proven things
a is correlated with b
Control for direction of causation, other variables
omg a causes b !

Austrian School
Hypothesis: A causes B
elaborate convincing argument that says A causes B, no testing of any hypotheses as our problem is "too complex" to test for, but don't worry guys we are right as our logic is sound.
So because we "proved it" A causes B


I'm not being critical - this is what they actually believe:

"Its statements and propositions are not derived from experience... They are not subject to verification or falsification on the ground of experience and facts." - Ludwig Von Mises
"[theories in the social sciences] can never be verified or falsified by reference to facts." - F.A. Hayek


Freed from pesky things like "facts" and "evidence" - this economic religion is perfect for arguing online.

It's clear that anyone who starts out describing the Austrian School as a "fringe economic theory" has no fricking clue what they're talking about. It's not a theory. It has many forms and proponents, which are not all in complete agreement. Much of it has in fact become mainstream economics (see Opportunity Cost)

Many Austrian Schoolers have no issues with modeling per se. Just modeling built to automatically produce results presupposed by it's creators (see Keynesian stimulus "model" predictions vs real world results over the last few years) A main point of their argument is that if a model doesn't make sense on an individual-by-individual level (defies rational market psychology) it can't be assumed to work on a macroeconomic scale.

Which is a main point of contention with Keynesians. They assume borrowing and spending in and of itself produces significant net benefit. But this defies rational individual experience.

[BroncoInferno]

Originally Posted by BroncoBeavis

A main point of their argument is that if a model doesn't make sense on an individual-by-individual level (defies rational market psychology) it can't be assumed to work on a macroeconomic scale.

Which is a main point of contention with Keynesians. They assume borrowing and spending in and of itself produces significant net benefit. But this defies rational individual experience.

You've just succinctly summed up the problem with Austrian/conservative economic thinking: individual experience trumps hard data. Individual experience is often an unreliable way to accuratetly access behavior/trends. That's why Austrians are fans of neat aphorisms rather than empirical data.

[BroncoBeavis]

Originally Posted by BroncoInferno

You've just succinctly summed up the problem with Austrian/conservative economic thinking: individual experience trumps hard data. Individual experience is often an unreliable way to accuratetly access behavior/trends. That's why Austrians are fans of neat aphorisms rather than empirical data.

I agree, it's a clear point of distinction, and in any given case it's possible neither side is entirely correct.

But you're oversimplifying. I never said you could model things accurately based on individual experience. I'm saying that, if you're building a model to predict something, if it looks like bull**** on an individual or community level, it's not fit to be applied to 300 million people. You know you can't borrow and spend your way to prosperity. Neither can the United States.

My favorite recent example is Obama's economic team's famous "Employment Rate With and Without Recovery Plan" model that they circulated to sell Obama's Keynesian stimulus proposal. This was updated to show the actual unemployment rate vs what this famous Keynesian model predicted.



Austrian reaction "Well ****, that sure as hell didn't work. The real world result was worse than this model predicted if we didn't do anything"

Keynesian reaction "Well, obviously the real world did something wrong, or was way worse than expected because our model proved things would be way better. In fact we probably should've doubled or tripled the stimulus spending. Then it wouldda worked as advertised."

[ghwk]

I can't believe that the human element is ignored in all these academic theories. As someone who has worked both in academia and business, scientific thoery only works when variables can be controlled.

Every academic model I've seen rolled out into the public world always deiviates from the expected outcome because people are not rational or even ethical for that matter. We cheat, constantly, maybe not every one of us but overall we do and when corporations, banks etc and the variability in corporate ethics get involved no academic model stands a chance. Human behavior trumps modeling everytime.

[Rohirrim]

http://econfaculty.gmu.edu/bcaplan/whyaust.htm

Mises and Rothbard certainly produced an original alternate paradigm for economics - and applied this paradigm to a number of interesting topics. Unfortunately, the foundations of their new paradigm are unfounded, and their most important applied conclusions unsound or overstated. The reasonable intellectual course for Austrian economists to take is to give up their quest for a paradigm shift and content themselves with sharing whatever valuable substantive contributions they have to offer with the rest of the economics profession - and of course, with the intellectually involved public. In sum, Milton Friedman spoke wisely when he declared that "there is no Austrian economics - only good economics, and bad economics,"[60] to which I would append: "Austrians do some good economics, but most good economics is not Austrian."

[BroncoBeavis]

The thing about Austrian economics is it's as much as you make of it. At it's core, it says that's it's very possible, (and if you're not careful) maybe likely, intervention will make things worse.

Now some supporters take this so far as to say intervention is never good, or never works. And this is the scarecrow that interventionists always go after.

But I'd say most supporters of the Austrian School would make a more mixed argument that intervention simply needs to make sense on a micro level before it could ever be assumed to work on a large scale. At the end of the day, Austrian economics is more of a criticism of standard economic practice than an entire economic ideology unto itself (although as I pointed out above, some people can stretch it into that) This is kinda what Friedman was getting at. He's not saying it's wrong. He's just saying it's not the whole story.

Keynes famously wrote that (in a stimulus scenario) it would be beneficial to pay people to dig holes just to fill them back up again. The Austrian outlook on this would be to look at my household, and maybe 2 of my neighbors. What if we collectively paid some guy full time, each a third of our own income each, to dig holes and fill them in? It would be both catastrophic and useless to 3 of us, while benefiting only one. This is common sense. But a good Keynesian simply stretches that out. Over 10,000 people, you'd barely even notice the hit. So there a "model" is born.

[Rohirrim]

First you have to decide what kind of world you want to live in, or are willing to live in. The first choice is a moral one.

[Blart]

Originally Posted by BroncoBeavis

Many Austrian Schoolers have no issues with modeling per se.

For "Beard of the Month" calendar? Maybe. Statistical modeling? Nope.

"subjective human choices makes mathematical modeling of the evolving market practically impossible and therefore its scholars eschew what they consider "naïve" and pointless mathematical modeling of the economy, considering much of mainstream economics a form of economic charlatanism."
http://wiki.mises.org/wiki/Austrian_School

Originally Posted by BroncoBeavis

It's clear that anyone who starts out describing the Austrian School as a "fringe economic theory" has no fricking clue what they're talking about.

I know this is hard to hear on an internet messageboard, but outside of internet messageboards, people laugh at Austrians.

Creationists : Biology :: Austrians : Economics


Let me give you an example,

http://ideas.repec.org/top/top.person.nbcites.html

^^ Those are the most cited economists in the world. How many Austrian School economists do you see on that list? (I thought I found one, but it turned out he was an Australian Economist)

Also, why do Ron Paul fans always think everything that isn't Austrian is suddenly Keynesian? Robert Lucas would be offended if you called him either. So would many Nobel Prize winning, free-market loving conservatives.
http://yourlogicalfallacyis.com/black-or-white



To be fair, Austrians did contribute to modern economics, but that was a century ago - history took the good parts and moved on.
http://en.wikipedia.org/wiki/History...onomic_thought

Even free-market conservatives moved on.

"I think the Austrian business-cycle theory has done the world a great deal of harm. If you go back to the 1930s, which is a key point, here you had the Austrians sitting in London, Hayek and Lionel Robbins, and saying you just have to let the bottom drop out of the world. You’ve just got to let it cure itself. You can’t do anything about it. You will only make it worse. You have Rothbard saying it was a great mistake not to let the whole banking system collapse. I think by encouraging that kind of do-nothing policy both in Britain and in the United States, they did harm." - Milton Friedman


Fringe. Theory. Popular with Glenn Beck (he loves Hayek) popular on youtube, unmentioned everywhere else.

[BroncoBeavis]

You said a lot there while saying very little.

Blah blah, Creationism, blah blah, Ron Paul, blah blah Consensus.

Why do you spend so much time trying to marginalize ideas and so little time engaging them?

And as far as Austrian contributions primarily being a century ago... So what? The current economic stimulus regime de jour is based on the theories of a guy that died 70 years ago. Hayek won his Nobel 30 years later. The timing is irrelevant.

[Blart]

Originally Posted by BroncoBeavis

Why do you spend so much time trying to marginalize ideas and so little time engaging them?

1) You claimed Austrian School wasn't a fringe school of thought.

2) Why engage? A creationist will flick away all data and evidence, and instead point to the bible and say, "See, I told you so!" An Austrian will flick away statistical models and historical evidence, and point to Praxeology and say, "See, I told you so!"

You've seen my fixation on graphs. I can post evidence of horrible recessions, I can post evidence of stabilizing markets, I can show you a modern country whose economy is practically Austrian School, but why bother?

Once again,

"[Praxeology's tenants]... are not subject to verification or falsification on the ground of experience and facts." - Ludwig Von Mises

[Blart]

Austrian School definitions

• A Priori/Deductive: The best way to understand economics, because empiricism doesn't work.

• Act/Action/Human Action: Because of the Action Axiom, Austrians really like to use the words "act" and "action." A lot.

• Aggregate/Aggregation: Evil. The "aggregation problem" can be used to handwave away any form of statistical argument. See Atom.

• Atom: What humans aren't. As in "You can't just force human action into an equation! Humans aren't atoms. Economics isn't physics."

• Bureaucrat/Government Bureaucrat: Idiot. Because government workers are not in the private sphere, they never have any incentive to do a good job, ever. Once you work for the government, you automatically become a drooling, blithering moron. Often appears as: "You want to entrust the decision to sell your lungs for money to a government bureaucrat?!"

• Coercion/Coercive force/At gunpoint: Any government policy is coercive by nature. It is always enforced at gunpoint. By jack-booted thugs.

• Conscious: Human. Animals cannot be conscious or make decisions. Evolutionary morality is a myth.

• Deflation: Good. It eliminates the evil inflation. What? It can cause unemployment? Well, those people just need to try harder.

• Department of Motor Vehicles (DMV): Definitive proof that government can't do anything right, ever.

• Economic fallacy: Anything at odds with Austrian school tenets. For example, Keynes' paradox of thrift is considered an "economic fallacy," because savings are good, and by methodological individualism, good + good = good, so everyone stuffing cash under their mattresses and never spending it isn't a bad thing for the economy.

• Empirical/Empiricism: Flawed method of understanding economics. Because variables can't be isolated via experimentation, empirical and statistical methods are too inherently flawed to bother with. Historical sciences? No such thing.

• Environment: Doesn't exist. Wanna save the environment? Privatize polar bears.

• Fallacy of the Broken Window: Refers to the parable of the broken window, but called a "fallacy" because it does not align with Austrian assumptions.

• Fiat currency: Fake. Just an IOU. Only paper monopoly money. Ditch it, buy gold.

• Federal Reserve: The arm of the government that creates the business cycle. When it lowers interest rates, that sends out radio signals to investors' brains and makes them too dumb not to make ridiculous loans.

• Free Market: Always wins. However, because government intervention in markets has always existed, there has never been a truly free market. Black markets, for some reason, don't count because they are illegal (anarcho-capitalists and minarchists disagree on this point). Therefore, there has never been a truly free market society, so the free market has never actually failed. Much like how commies say "real" communism was never put into practice.

• Gold/gold standard: Best thing ever. Gold prevents the evil government bureacrats and jack-booted thugs from creating the evil inflation. It also gives you something to invest your worthless paper money in so you have something to eat when the Economic Armageddon comes.

• Government: Evil. The thing that burdens all the John Galts of the world with unnecessary regulations and employs jack-booted thugs via the IRS to steal the peoples' money through outright theft, which is renamed "taxation."

• Inflation: Evil. The driver behind fake growth. It's well-known that Ludwig von Mises' parents were eaten by inflation.

• Intent: The reason for any action.

• Jack-booted thug: See Bureaucrat. Except this time with a gun.

• Malinvestment: Bull**** investment.

• Misallocation of resources: Making bull**** investments on a massive scale as in the dot-com bubble or housing bubble. Usually happens because of the Fed.

• Natural Monopoly: An economic fallacy. Only the government can create a monopoly. At gunpoint.

• Peter Schiff: Always right.

• Public roads: A sign of creeping socialism.

• Rational: Having some utility value to a person. Basically, everything is rational because Austrians rely on extreme subjectivism, so any action can be considered "rational" as long as it fulfills the desire of the person who take that action, but not necessarily "moral."

• Recession/Depression: A means by which the market purges itself of malinvestments.

• Real loanable funds: Loanable funds is a common self-explanatory economic term. By "real," Austrians mean hard cash moneys. Anything else is just an IOU that creates inflation and thus not "real" and evil.

• Reallocation of resources: After a bubble bursts, the malinvestments are set free to be reallocated. Those who lose their jobs due to the reallocation had it coming anyway.

• Say's Law: For Austrians, basically means supply always precedes demand. Austrian school is supply-side. Because the first person to ever trade something had to find or make the product first, supply must always come before demand. Always.

• Social Security: Government Ponzi scheme. Screw old people, privatize it.

• Socialism/Communism: Government. Doesn't include military, police, and courts for minarchists.

• Statistics: Math is hard. See a priori and empiricism.

• Taxes: Legalized theft.

• Uneconomical: In disagreement with Austrian theory. What is economical is also always good and moral.

• Unintended consequences: Because all public policy will have unintended consequences, government should do nothing.

http://rationalwiki.org/wiki/Fun:Austrian_school

[BroncoBeavis]

Originally Posted by Blart

1) You claimed Austrian School wasn't a fringe school of thought.

And you conceded that portions of it have already been accepted into the mainstream. Meaning, you can no longer dismiss it out of hand as a "fringe school" or "theory" as you originally described it.

2)Why engage? ....
An Austrian will flick away statistical models and historical evidence, and point to Praxeology and say, "See, I told you so!"

So what you're saying is that as long as you can devise a sciencey looking method around even the most flawed premise, you should never have to defend the premise itself. Because you've shrouded it in a formula.

Hayek explained it very well in his Nobel Speech.

http://www.nobelprize.org/nobel_priz...k-lecture.html

I want to do this to avoid giving the impression that I generally reject the mathematical method in economics. I regard it in fact as the great advantage of the mathematical technique that it allows us to describe, by means of algebraic equations, the general character of a pattern even where we are ignorant of the numerical values which will determine its particular manifestation. We could scarcely have achieved that comprehensive picture of the mutual interdependencies of the different events in a market without this algebraic technique. It has led to the illusion, however, that we can use this technique for the determination and prediction of the numerical values of those magnitudes; and this has led to a vain search for quantitative or numerical constants. This happened in spite of the fact that the modern founders of mathematical economics had no such illusions. It is true that their systems of equations describing the pattern of a market equilibrium are so framed that if we were able to fill in all the blanks of the abstract formulae, i.e. if we knew all the parameters of these equations, we could calculate the prices and quantities of all commodities and services sold. But, as Vilfredo Pareto, one of the founders of this theory, clearly stated, its purpose cannot be "to arrive at a numerical calculation of prices", because, as he said, it would be "absurd" to assume that we could ascertain all the data.4 Indeed, the chief point was already seen by those remarkable anticipators of modern economics, the Spanish schoolmen of the sixteenth century, who emphasized that what they called pretium mathematicum, the mathematical price, depended on so many particular circumstances that it could never be known to man but was known only to God.5 I sometimes wish that our mathematical economists would take this to heart.

[cutthemdown]

I'd be all for more spending like Obama wants on infrastructure. What you do is cut off some money you just give away to people to not work and instead spend that money of infrastructure and defense like feds should be doing. Problem is Obama wants to spend money everywhere like a drunken sailor.

[mhgaffney]

must-watch 10 minute video: Financial Crime

This thread is in danger of disappearing down a rabbit hole. Most of you are missing the point -- about the Austrian school.

It boils down to raiding the public sector to expand the profits of a small plutocracy.

This short vid will put it all in perspective:

http://www.informationclearinghouse....ticle33932.htm

[Blart]

Originally Posted by BroncoBeavis

And you conceded that portions of it have already been accepted into the mainstream. Meaning, you can no longer dismiss it out of hand as a "fringe school" or "theory" as you originally described it.

A list of Austrian School contributions to mainstream economics in the last 80 years:



(crickets)


Being an Austrian Economist in 1890 was mainstream. Being an Austrian Economist in 2013 is fringe.

It's like if there were an entire school of economists who followed Keynesian economics as it was circa 1940~ and refused to update their methodologies or theories, in the face of overwhelming empirical evidence. They would be called cranks, and rightly so.

Ironically, the Austrian School is comparable to Marxism in this regard.



Why are you even arguing this? Austrian economists themselves frequently say they're "outside the mainstream"

http://mises.org/media/6446/Austrian...ream-Economics
http://bastiat.mises.org/2012/08/10-...eam-economics/
http://archive.mises.org/5309/taleb-...eam-economics/

They speak at lectures on "heterodox economics"
http://archive.mises.org/16059/colom...dox-economics/

They are happy being fringe. Why can't you be happy for them?




If you admire the Austrian School, good for you. If you hate Keynes, way to go. Study New Classical macroeconomics. You don't have to faithfully believe in a dead science.

https://www.coursera.org/category/economics

[Blart]

Milton Friedman on Mises, which shows you the amount of intellectual openness allowed in the Austrian School:


http://reason.com/archives/1995/06/0...-both-worlds/5

Reason: But you knew Mises personally. Did you see the intolerance that you find in his method also in his personal behavior?


Friedman: No question. The story I remember best happened at the initial Mont Pelerin meeting when he got up and said, "You're all a bunch of socialists." We were discussing the distribution of income, and whether you should have progressive income taxes. Some of the people there were expressing the view that there could be a justification for it.

Another occasion which is equally telling: Fritz Machlup was a student of Mises's, one of his most faithful disciples. At one of the Mont Pelerin meetings, Fritz gave a talk in which I think he questioned the idea of a gold standard; he came out in favor of floating exchange rates. Mises was so mad he wouldn't speak to him for three years. Some people had to come around and bring them together again. It's hard to understand; you can get some understanding of it by taking into account how people like Mises were persecuted in their lives.






BIG EDIT:

Found this during a bit of research - Austrians toyed with, if not outright accepted evidence and facts until the 1940's. My sincere apologies to any Austrian Economists who worked prior to this. I'm sure you're reading.

In the 40's, something happened that troubled cranky old Von Mises - we did. The damn US OF A! We had the New Deal, our Tennessee Valley Authority, Works Projects Administration, Rural Electrification, and Federal Deposit Insurance Corporation which proved that a well-run government could be a big help for an economy - we went from a second-rate backwater into the most powerful economy that the world has ever seen.

The Austrian's answer? Do away with evidence. In 1949, the Austrian School already on the fringes, Mises wrote "Human Action" where he laid out his idea of "Praxeology" which saved their ideas from statistical evidence, math, and reality, ensuring the school's cult status for decades to come.

Here it is, written as densely as possible so people can't smell the BS:

In historical experience we can observe only complex phenomena, and an experiment is inapplicable to such a situation. Sometimes it is said that a mental experiment (Gedankenexperiment) could take its place. However, a mental experiment, logically considered, has an entirely different meaning from a real experiment. It involves thinking through the implications of a proposition in the light of its compatibility with other propositions that we accept as true. If these other propositions are not derived from experience, then the mental experiment makes no reference to experience.

To translate, If I create a thought experiment that isn't based on any evidence, then you can't use evidence to disprove it, because I just made up a rule that says so! Instead, you have to have to use all this other bull**** I made up to disprove the new bull**** I just made up! And you can't use anything as part of an argument that isn't bull**** that I already agree with. Suck on it, socialists!

Rand Paul 2016! 2+2 = Potato

[BroncoInferno]

Originally Posted by BroncoBeavis

if you're building a model to predict something, if it looks like bull**** on an individual or community level, it's not fit to be applied to 300 million people.

Well, and here again I would argue is a problem with Austrian thinking: the national economy (or "macroeconomy," if you prefer) is not the same thing as the personal finances of Average Joe. It's wildly more complex, and therefore simplistic Austrian excercises are not sufficient to explain or deal with it.

[Rohirrim]

Isn't this the main problem we have in America today? One group is trying to govern based on reality and another is trying to govern based on ideology.

[BroncoBeavis]

Originally Posted by BroncoInferno

Well, and here again I would argue is a problem with Austrian thinking: the national economy (or "macroeconomy," if you prefer) is not the same thing as the personal finances of Average Joe. It's wildly more complex, and therefore simplistic Austrian excercises are not sufficient to explain or deal with it.

That's partly true, and why any Austrian-leaning economist would tell you that what might work on the micro level might not work on the macro level.

What most of them would say though is that a principle that DOESN'T work on the micro level CAN'T work on the macro.

At this point it's not even really an economic school so much as common sense shaking it's head at modern economic insanity.

[BroncoBeavis]

Originally Posted by Rohirrim

Isn't this the main problem we have in America today? One group is trying to govern based on reality and another is trying to govern based on ideology.

Buy now, pay later might be 'reality' at this point. But it was not always, and does not always have to be. In fact, that 'reality' will necessarily have to end some day. Better sooner than later.

[Arkie]

Originally Posted by Rohirrim

Isn't this the main problem we have in America today? One group is trying to govern based on reality and another is trying to govern based on ideology.

It's really two clueless groups. Each thinks they are on the side of reality. There's only one group governing, but the population is divided into two groups even though we're diverse enough to have 20 groups.

[BroncoBeavis]

Originally Posted by Arkie

It's really two clueless groups. Each thinks they are on the side of reality. There's only one group governing, but the population is divided into two groups even though we're diverse enough to have 20 groups.

Doesn't matter if you had a thousand different groups. At the end of the day they'd all be striving to collect 51% of the power pie. Even if they called themselves by different names back home, once they belly up to the bar in DC, there becomes only two functional factions... those in power and those opposed. You see it all the time in Parliamentary nations with more 'parties.' Once the election's finished, you have different groups selling their proverbial souls in various way in order to come to some sort of agreement to share power. Once they have their grip, all who couldn't or wouldn't be brought in become the "principled" opposition. All they accomplish in a multiparty parliamentary system is the outsourcing of two-party selection from voter to representative.

People like the idea of no (or maybe more) parties. But at the end of the day, it's just the nature of the beast. There may be times of disruption when it seems like more than 2 groups exist. But given time, it will all settle back into two fundamental groups of people striving for control.

[Rohirrim]

Originally Posted by BroncoBeavis

Buy now, pay later might be 'reality' at this point. But it was not always, and does not always have to be. In fact, that 'reality' will necessarily have to end some day. Better sooner than later.

Wrong again. The "reality" is that we're in the worst recession in 80 years. It was caused by massive criminality on the part of banksters and Wall Street. Cutting debts and deficits at this point in time might be ideological cotton candy for the Right, but it would be disastrous for those living in the real world. The one person most responsible for this debacle is the Republican president, George W. Bush, who was completely absent from the bridge for eight years. I don't remember anybody on the Right complaining when he didn't veto a single spending bill his first four years in office. Now? Nothing but partisan garbage to attack Obama.

Obama, unfortunately, is probably going down as worse than Bush. Why? Because he has written in stone the idea of "Too big to fail" and even worse, "Too big to prosecute." Couple that with Citizens United, and you can pretty much flush the whole show. Wealth inequality is now worse than probably any time in human history. These sorts of numbers lead to the collapse of societies. Quibbling over deficit spending is like arranging the deck chairs on the Titanic.

[BroncoBeavis]

Originally Posted by Rohirrim

Wrong again. The "reality" is that we're in the worst recession in 80 years. It was caused by massive criminality on the part of banksters and Wall Street. Cutting debts and deficits at this point in time might be ideological cotton candy for the Right, but it would be disastrous for those living in the real world. The one person most responsible for this debacle is the Republican president, George W. Bush, who was completely absent from the bridge for eight years.

GW might not have done as much as he should have to keep banks/housing under control. But please, let's keep some perspective.

http://www.theatlantic.com/business/...crisis/249903/

Congressman Frank, of course, blamed the financial crisis on the failure adequately to regulate the banks. In this, he is following the traditional Washington practice of blaming others for his own mistakes. For most of his career, Barney Frank was the principal advocate in Congress for using the government's authority to force lower underwriting standards in the business of housing finance. Although he claims to have tried to reverse course as early as 2003, that was the year he made the oft-quoted remark, "I want to roll the dice a little bit more in this situation toward subsidized housing." Rather than reversing course, he was pressing on when others were beginning to have doubts.

His most successful effort was to impose what were called "affordable housing" requirements on Fannie Mae and Freddie Mac in 1992. Before that time, these two government sponsored enterprises (GSEs) had been required to buy only mortgages that institutional investors would buy--in other words, prime mortgages--but Frank and others thought these standards made it too difficult for low income borrowers to buy homes. The affordable housing law required Fannie and Freddie to meet government quotas when they bought loans from banks and other mortgage originators.

At first, this quota was 30%; that is, of all the loans they bought, 30% had to be made to people at or below the median income in their communities. HUD, however, was given authority to administer these quotas, and between 1992 and 2007, the quotas were raised from 30% to 50% under Clinton in 2000 and to 55% under Bush in 2007. Despite Frank's effort to make this seem like a partisan issue, it isn't. The Bush administration was just as guilty of this error as the Clinton administration. And Frank is right to say that he eventually saw his error and corrected it when he got the power to do so in 2007, but by then it was too late.

It's true that Bush didn't do what needed to be done. But let's not pretend that anyone else in Washington was standing in line for that job either.

I don't remember anybody on the Right complaining when he didn't veto a single spending bill his first four years in office. Now? Nothing but partisan garbage to attack Obama.

Obama, unfortunately, is probably going down as worse than Bush. Why? Because he has written in stone the idea of "Too big to fail" and even worse, "Too big to prosecute." Couple that with Citizens United, and you can pretty much flush the whole show. Wealth inequality is now worse than probably any time in human history. These sorts of numbers lead to the collapse of societies. Quibbling over deficit spending is like arranging the deck chairs on the Titanic.

There was complaining. But as someone who thinks the brakes need to be applied, when you're given the choice between someone on cruise control and someone who wants to accelerate, you tend to give the status quo more BOTD than it deserves. Plus, as I've said before, politics is a team sport.